Archives: Quiz

Table 16.5 Refer to Table 16.5. A point on the market demand curve for this public good would be: at a price of ________ quantity demanded would be ________. A) $15; 5 B) $25; 3 C) $50; 1 D) $55; […]

Monopolistically competitive firms use product differentiation to A) ensure long-run profits. B) achieve market power. C) block other firms from entering the industry. D) limit the number of firms in the industry. You take a class that improves your critical […]

If the opportunity costs of producing a good increase as more of that good is produced, the economy’s production possibility frontier will be A) negatively sloped and “bowed inward” toward the origin. B) negatively sloped and “bowed outward” from the […]

If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price inelastic. Capital stock increases with investment and decreases with depreciation. Answer: TRUE When supply is fixed, price is supply determined. […]

The demand for Tyson chicken is more elastic than the demand for meat. A U.S. import fee on oil would reduce the domestic quantity demanded of oil. Answer: TRUE Economic growth shifts a society’s production possibility frontier away from the […]

Markets in which entry and exit are difficult are known as contestable markets. Economic income is measured “after-tax.” Answer: FALSE The existence of public goods can be a source of market failure. Answer: TRUE A U.S. import fee on oil […]

One reason for selecting a section of microeconomics for which attendance is part of the grade (as opposed to one where it is not) is that it serves as a commitment device that will get you to attend class. Schumpeter […]

The law of diminishing marginal utility implies that marginal utility never becomes negative. Adverse selection and moral hazard are problems that arise in the presence of asymmetric information. Answer: TRUE A firm will only invest when the marginal revenue product […]

The present discounted value of a stream of future income increases as the interest rate decreases. When wages fall, the employment of capital always decreases. Answer: FALSE Positive economics looks at outcomes of economic behavior and evaluates them as good […]

If the exchange rate between the United States and Portugal changes from $1 = 1 euro to $1 = 2 euros, then holding everything else constant, the price of U.S. goods in Portugal will decrease. As firms hire additional units […]

Firms in a monopolistically competitive industry are small relative to the total market. Refer to the Economics in Practice on page 361. Sometimes the lack of information in an advertisement serves as a signal. Answer: TRUE The value of capital […]

Favored customers receive special treatment from dealers during periods of excess demand. A decrease in demand for a product will cause the price of the product to rise and supply of the product to increase. Answer: FALSE Table 14.2 B’s […]

Acid rain is an example of a positive externality. Average total cost and average variable cost are minimized at the same level of output. Answer: FALSE Capital stock is the current market value of all of the shares of stock […]

Jim used to be very careful with his car. However, once he bought full auto insurance on it, he stopped turning on his alarm or even locking it when parking it. This is an example of adverse selection. Marginal social […]

Human capital is a type of social capital. The more homogeneous are consumers’ preferences, the more product variety will be observed. Answer: FALSE A perfectly competitive system is efficient. Answer: TRUE Assuming a perfectly competitive market implies that households do […]

In the Cournot model, firms take their rivals’ reactions as given. Input and output markets operate independently and thus should be analyzed as separate entities. Answer: FALSE A retail sales tax is a proportional tax with respect to income. Answer: […]

The biggest single transfer program at the federal level is Social Security. The total of consumer plus producer surplus is at a minimum at the market equilibrium. Answer: FALSE Disaggregating the distribution of income by race shows that the mean […]

Based on a World Bank study, medical treatment in developing countries has an elasticity value greater than 1. Owning a share of stock entitles the shareholder to a portion of the firm’s profits. Answer: TRUE Monopolistically competitive firms are able […]

If a monopolistically competitive firm is producing an output level where its marginal cost is equal to its marginal revenue but it still earns a loss, then it should always shutdown in the short run. Efficiency is the condition in […]

Behavioral economics goes against the basic teachings of both psychology and economics. The price of any factor of production in a competitive market depends on the value of the final product it is used to produce. Answer: TRUE Performance compensation […]

In general, the demand curve facing the monopolistically competitive firm is more elastic than the demand curve facing the perfectly competitive firm. If a group has a negative elasticity of labor supply (above some income level), then continued increases in […]

The U.S. beer industry has an HHI of 3525. If two beer producers propose a merger that would increase the industry HHI by 25 points, then the merger would be challenged based on the change in the HHI. If Holland […]

A firm that sells a car for $30,000 gets producer surplus of $30,000. In the short run, nonprice rationing will happen whenever there is excess demand in a market. Answer: TRUE A fair bet is a game whose expected value […]

Only those products in which a country has a comparative advantage will be competitive in world markets. Labor market compensation contracts can be designed to screen out poor quality workers as well as provide employees with incentives to work hard. […]

Resources are unlimited in a wealthy society. When one market reaches a new equilibrium, the general equilibrium condition has been satisfied. Answer: FALSE Queuing, or waiting in line, is an alternative rationing mechanism to price rationing. Answer: TRUE A movement […]

When firms price-discriminate, people with _____ price elasticity of demand will pay _____ prices relative to those purchasing the same product who have a _____ price elasticity of demand. A) higher; higher; lower B) lower; lower; higher C) lower; higher; […]

All else equal, if a price floor above the equilibrium is imposed on a market and the government buys the surplus, consumer surplus will _____ and producer surplus will _____. A) fall; rise B) fall; fall C) rise; fall D) […]

An artificially scarce good is a good or service for which exclusion is _____ and which is _____ in consumption. A) possible; rival B) possible; nonrival C) not possible; rival D) not possible; nonrival (Table: Marginal Utility per Dollar of […]

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for: A) medical exams to be more price-elastic. B) Bayer aspirin to be more […]

An unwritten, unspoken agreement through which firms limit competition among themselves is called: A) satisfying. B) tacit collusion. C) overt collusion. D) a cartel. Answer: A Answer: A Which of the following U.S. welfare programs is a means-tested in-kind benefit? […]

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The price elasticity of demand, by the midpoint method, for the segment FG is approximately: A) 0. B) 0.09. C) 0.5. D) […]

In the United States, payments to labor account for: A) 70% of total income, a share that has not fluctuated much in the past 30 years. B) 50% of total income, but the returns to land have been increasing. C) […]

For some people, coffee and milk are perfect complements. Their indifference curves are: A) right angles. B) straight lines between the X and Y axis. C) straight lines out of the origin. D) regular downward-sloping indifference curves, but their budget […]

A leftward shift of a supply curve is caused by: A) an increase in the number of sellers. B) a technological improvement in production. C) an increase in the cost of an input. D) an increase in the number of […]

Table: The Lemonade Market Price of Lemonade (per cup) Number of Cups Demanded (QD) Number of Cups Supplied (QS) $0.50 250 25 0.75 200 50 1.00 150 75 1.25 100 100 1.50 50 125 1.75 20 150 (Table: The Lemonade […]

If two goods are complements, their cross-price elasticity of demand is: A) less than 0. B) equal to 0. C) positive but almost equal to 0. D) greater than 0. (Table: Marginal and Total Benefit) Look at the table Marginal […]

(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. If you studied for a total of three hours and divided your time to maximize your combined scores, you […]

Common resources tend to be _____ in private markets. A) priced too high B) efficiently priced C) overconsumed D) underconsumed The strategy of investing in several assets so that any possible losses are independent events is: A) diversification. B) private […]

Which of the following is studied in macroeconomics? A) the change in automobile sales due to a change in the price of automobiles B) the effect of a tax reduction on the profits of an individual business C) recessions D) […]

(Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. If the demand curve for good Z is linear, it can be expressed as: A) Qd = 3P. B) Qd = 50 ” 2P. C) […]

Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is $100 and someone offers him $125 to complete this additional report, Tony should: A) not complete the additional report, since he will incur […]

Unwritten or unspoken understandings through which firms restrict competition are called: A) cartel agreements. B) oligopoly agreements. C) overt collusion. D) tacit collusion. If the government imposes binding rent control: A) rent will be set above the equilibrium price. B) […]

Assume that two combinations of two goods yield the same level of satisfaction. We can conclude that these combinations are always on: A) the same price line. B) the same budget constraint. C) the same indifference curve. D) different indifference […]

Figure: The Market for Yachts (Figure: The Market for Yachts) Look at the figure The Market for Yachts. A price _____ of _____ will bring about the same price and output in the market for yachts as would an excise […]

In the short run, as output gets larger: A) fixed cost gets smaller. B) the average variable cost curve gets closer to the average total cost curve. C) marginal cost gets smaller. D) average total cost decreases after the point […]

The point at which the axes of a graph intersect is called the: A) slope. B) origin. C) graph. D) intercept. (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. […]

(Figure: Wine and Wheat) Look at the figure Wine and Wheat. The opportunity cost of moving from producing ONLY wheat to producing at point D is _____ tons of wheat. A) 3 B) 6 C) 9 D) 15 Answer: Answer: […]

Scenario: Diversification Morris is considering investing $10,000 in a sunglass company or a rain poncho company. If it is a rainy year and he invests only in the sunglass company, he will lose $5,000. However, if it is a rainy […]

Figure: The Linear Demand Curve (Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your […]

Krista’s dry-cleaning business incurs $900 per month in fixed costs. Last month her total output was 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost _____ by a little more […]